Looking for extra income, space for loved ones, or a creative way to add housing? Prefab backyard homes might be the solution you’ve been waiting for. With faster build times, lower costs, and growing government incentives—this once “alternative” idea is now going mainstream.

Let’s break down why prefab homes and secondary suites are on the rise, how much they cost, what funding is available (some up to $90,000!), and how real Canadians are using them to change the game.

Why Prefab Homes Are Booming

Prefab homes (also known as modular or factory-built homes) are built off-site, then delivered and assembled on your property. They’re fast, efficient, and designed to meet the same building codes as traditional houses.

Top benefits:

• Faster builds – Often move-in ready in weeks

• Lower costs – Fewer surprises and less waste

• Eco-friendly – Smaller carbon footprint

• Zoning-friendly – Many cities now allow garden or laneway suites

• Government support – Big incentives for homeowners

This isn’t just about trends—it’s about real solutions for housing supply, affordability, and family living.

Funding for Prefab Backyard Homes: What’s Available?

Cities across Canada are offering generous incentives for homeowners who add an Additional Residential Unit (ARU) like a prefab suite or laneway home. The goal? Boost affordable rental options and support multi-generational living.

Example: London, Ontario

• $45,000 interest-free loan – repayable over 9 years

• $45,000 forgivable loan – if rented below market rate for 10 years

That’s up to $90,000 in support for homeowners—no developer status needed.

Other Municipal Incentives

• Toronto – Up to $50,000 forgivable loan

• St. Catharines – Up to $80,000 in grants

• Peel Region – Up to $30,000 forgivable loan

• Ottawa – Offers zoning and planning support

Requirements typically include:

• Long-term rentals (not Airbnb-style)

• Affordable rent based on CMHC guidelines

• Local permit and insurance compliance

Real Story: The Bakers’ Backyard Prefab Success

Mark and Sarah Baker built a 750 sq. ft. prefab suite behind their home. They worked with Axe Living, a modular builder in Ontario. The results?

• Unit arrived 80% complete

• Move-in ready in under 3 weeks

• Built for about $300/sq. ft., including taxes and hookups

• Cheaper than traditional construction by 25–30%

With municipal funding, their build became even more affordable.

How to Finance a Prefab Backyard Home

You don’t need to refinance your whole mortgage to fund a secondary suite. Here are smart financing options:

• HELOC – Flexible, great for homeowners with equity

• CMHC Secondary Suite Refinance Program – Borrow up to 90% of your home’s value

• Construction loan – Good for larger or staged builds

• Second mortgage – Useful if you want to leave your first mortgage intact

Tip: Work with a mortgage advisor who understands ARUs and prefab housing.

Insurance for Prefab Homes: What to Watch Out For

Not all insurers understand modular homes yet. The Bakers had to switch insurers when theirs declined coverage. Their new policy came with a 40% premium increase.

To avoid surprises:

• Call your provider early

• Ask specifically about prefab and ARU coverage

• Confirm both homes are fully insured

What If You Sell Before the Loan Term Ends?

Good news: in cities like London, the forgivable loan may transfer to a new owner—if they continue to rent the unit affordably. If not, a portion of the loan may need to be repaid.

This flexibility makes prefab homes a great investment even if you plan to sell in a few years.

Prefab Homes for Families

Prefab homes aren’t just about income—they’re a lifeline for families.

• Help aging parents live independently

• Support loved ones with disabilities

• Keep adult children nearby without crowding

• Stay close, while respecting privacy

Programs like London’s forgivable loan help make this kind of housing truly attainable.

Ready to Explore Prefab Homes?

If you’ve got the space and the vision, now is the time. Between funding options, faster builds, and flexible zoning, prefab homes are finally getting their moment.

Your next step? Let’s talk.

As a mortgage professional, I help homeowners like you finance modular builds, unlock equity, and take advantage of municipal grants. I’ll walk you through it.

📞 Call today or book a free consultation to explore your options.